Brutal transformation! That’s the only way to phrase what has been taking place at J.C. Penney. To the company’s credit, it has tried everything, which includes but isn’t limited to a new pricing strategy, an improved shopper experience, and an upgraded logo. A new pricing strategy might have had potential, but shopper experiences have mostly worsened due to poor employee morale, and an upgraded logo is nothing more than a complete waste of time. People don’t shop at a specific retailer because of its new and improved logo. Style might be important, but substance should always be a priority.

CEO Ron Johnson wanted to make J.C. Penney fresh and hip. This was a novel idea, but that’s not J.C. Penney’s demographic. J.C. Penney caters to an older, middle-class crowd that simply wants good bargains. The “everyday low prices” idea was obviously a failure, but at least this has been recognized. Discount coupons have returned. But will it be too little too late?

It’s possible for J.C. Penney to make a comeback, but the headwinds it’s facing are more like gale force winds. Shoppers looking for bargains will likely visit Wal-Mart Stores Inc. (NYSE:WMT) or Target Corp. (NYSE:TGT). Those looking for convenience will shop online at Amazon.com Inc. (NASDAQ:AMZN) or other online retailers. As if that’s not enough to worry about, investors have lost confidence. Some of these are very large investors. For example, Vornado Realty Trust is selling 10 million shares.

Of 20 analysts covering the stock, one has a Buy rating, 12 have a Hold rating, and seven have a Sell rating. It’s rare to see the majority of analysts on the Sell side of a stock. In most cases, if analysts don’t believe in the story, they will play it safe and give the stock a Hold rating. A Sell rating is a very strong message. Yet another big concern is the health of the economy.

If J.C. Penney performs this poorly in a “recovering economy,” then what will happen in a weak economy? Then again, this might be a moot point. This “economic recovery” has helped the upper class more than the middle class. Therefore, it’s possible that we have already seen how a weak economic environment will affect J.C. Penney. J.C. Penney has recently dealt with sinking revenues, atrocious earnings, margin contractions, and even a portion of a wall collapsing and injuring a shopper. Can it get any worse? The chart below compares fundamentals for J.C. Penney, Kohl’s Corp. (NYSE:KSS), and Macy’s (NYSE:M). These three companies differ in size.

J.C. Penney has a market cap of $3.30 billion, Kohl’s has a market cap of $10.61 billion, and Macy’s has a market cap of $16.28 billion.

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That isn’t a typo in the chart above. The short position for J.C. Penney is a whopping 44.80 percent. This indicates a complete lack of confidence in the company’s future potential. If good news were to come out and surprise the market, then a short squeeze would take place, which would lead to enormous gains for longs. However, the odds of this taking place aren’t very high. Let’s take a look at some more important numbers prior to forming an opinion on this stock.

E = Equity to Debt Ratio Is Normal

The debt-to-equity ratio for J.C. Penney is slightly weaker than the industry average of 0.70. Debt management isn’t the big issue for J.C. Penney – at least not yet.

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T = Technicals on the Stock Chart Are Weak

J.C. Penny has underperformed Kohl’s and Macy’s for every time frame listed below. This is in addition to no yield, whereas Kohl’s and Macy’s both offer decent yields. At the current time, there are no signs of hope for a trend change in regards to J.C. Penney’s stock performance.

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At $15.00, J.C. Penney is trading below all its averages.

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E = Earnings Have Been Atrocious

Revenue has seen steady declines over the past several years. Earnings have seen a tremendous drop. J.C. Penney had been holding on after the financial crisis of 2008/2009, but management misfired with its game plan.

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When we look at the last quarter on a year-over-year basis, we see significant drops in revenue and earnings. The pain never ceases for J.C. Penney investors.

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Now let’s take a look at the next page for the Trends and Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?

T = Trends Do Not Support the Industry

Brick-and-mortar retailers have been forced into cost-cutting mode due to increased competition from other retailers as well as online retailers. The current economic environment can’t support the amount of retailers out there right now. Only the strongest will survive, and J.C. Penney is a huge underdog.

Conclusion

J.C. Penney is suffering from revenue declines, weak margins, poor top-line and bottom-line results, and a lack of confidence from shoppers and investors. However, this story can really be summed to a lack of clarity. Management is constantly changing its game plan, and investors despise a lack of clarity. The only bullish argument here is that the bad news might already be priced in. However, this would be a very ambitious argument.